business as institution

8/3/2019 Business as Institution

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Business asBusiness as InstitutionInstitution

ByBy

Dr.Madhvendra MisraDr.Madhvendra Misra


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What is Business?What is Business?

The Concept of BusinessThe Concept of Business

General MeaningGeneral Meaning

Legal InterpretationLegal Interpretation

Corporation & BusinessCorporation & Business


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The Concept of BusinessThe Concept of Business

TheThe basicbasic ideaidea of of businessbusiness isis toto bebeengagedengaged oror busy'busy'.. ItIt representsrepresents aa situationsituation

ofof constantconstant associationassociation toto aa ideaidea mentallymentally

&& seriousserious physicalphysical efforteffort toto realizerealize thethe

samesame..


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General MeaningGeneral Meaning

Historically,Historically, thethe termterm businessbusiness referredreferred toto activitiesactivities oror interestsinterests.. ByBy

extensionextension thethe wordword becamebecame (as(as recentlyrecently asas thethe 1818thth century)century) synonymoussynonymouswithwith ""anan individualindividual commercialcommercial enterpriseenterprise"".. ItIt hashas alsoalso takentaken onon thethe moremoregeneralgeneral meaningmeaning ofof"a"a nexusnexus ofof commercialcommercial activities"activities"..

BusinessesBusinesses areare establishedestablished toto performperform economiceconomic activitiesactivities.. WithWith rarerareexceptionsexceptions (such(such asas cooperatives,cooperatives, corporatecorporate bodies,bodies, nonnon--profitprofitorganizationsorganizations andand institutionsinstitutions ofof government),government), theythey areare forfor--profitprofit venturesventures..Th

atTh

at is,is, oneone of of thet

he mainmain objectivesobjectives ofof t

het

he ownersowners andand operatorsoperators ofof t

het

hebusinessbusiness isis toto receivereceive aa financialfinancial returnreturn forfor theirtheir time,time, efforteffort andand capitalcapital..


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Legal Interpretation of BusinessLegal Interpretation of Business

AA corporationcorporation is a legal entity (distinct from ais a legal entity (distinct from anatural person) which often has similar rights innatural person) which often has similar rights inlaw to those of a person.law to those of a person.


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Legal Interpretation contLegal Interpretation cont

CorporateCorporate personhoodpersonhood isis aa termterm toto describedescribe lawlawthatthat allowsallows corporationscorporations toto havehave ""inalienableinalienable rightsrights""(sometimes(sometimes calledcalled constitutionalconstitutional rights)rights) justjust likelike(human)(human) personspersons..

TheThe choicechoice of of thethe wordword "person""person" inin "personhood""personhood"arisesarises fromfrom thethe wayway thethe 1414thth AmendmentAmendment toto thetheUnitedUnited StatesStates ConstitutionConstitution waswas wordedworded andand fromfromearlierearlier legallegal usageusage ofof thethe wordword personperson..


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Corporation & BusinessCorporation & Business

Benefits of forming a corporationBenefits of forming a corporation

Origin of corporationOrigin of corporation


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Corporation & Business cont...Corporation & Business cont...

Benefits of forming a corporationBenefits of forming a corporation

The most salient features of incorporation include:The most salient features of incorporation include:

((11)) LimitedLimited LiabilityLiability.. UnlikeUnlike inin aa partnership,partnership, stockholdersstockholders ofof aacorporationcorporation holdhold nono liabilityliability forfor thethe corporation'scorporation's debtsdebts andandobligationsobligations.. AsAs aa resultresult theirtheir potentialpotential losseslosses areare limitedlimited toto thetheamountamount whichwhich theythey paidpaid forfor thethe stockstock.. NotNot onlyonly doesdoes thisthis allowallow

businessesbusinesses toto engageengage inin riskyrisky enterprises,enterprises, butbut limitedlimited liabilityliabilityalsoalso formsforms thethe basisbasis forfor tradingtrading inin corporatecorporate stockstock.. WithoutWithout thethelimitationlimitation onon thethe amountamount thatthat anan investorinvestor cancan lose,lose, thethe timetime andandefforteffort requiredrequired toto determinedetermine whetherwhether thethe stockstock couldcould wipewipe thetheinvestorinvestor outout wouldwould renderrender thethe stockstock marketmarket veryvery illiquidilliquid (as(as oneonecancan observeobserve inin thethe veryvery illiquidilliquid marketmarket forfor partnershippartnership interests)interests)..


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((22)) PerpetualPerpetual LifetimeLifetime.. TheThe assetsassets andand structurestructure ofofthethe corporationcorporation existexist beyondbeyond thethe lifetimelifetime ofof anyany ofof itsitsshareholders,shareholders, officersofficers oror directorsdirectors.. ThisThis allowsallows forfor

capitalcapital toto bebe stable,stable, andand thusthus investedinvested inin largerlarger andandlongerlonger--termterm projects,projects, thanthan ifif thethe corporatecorporate assetsassetswerewere subjectsub ject toto dissolutiondissolution andand distributiondistribution.. ThisThisfeaturefeature alsoalso hadhad greatgreat importanceimportance inin thetheMedievalMedieval period,period, whenwhen landland donateddonated toto thethe ChurchChurch (a(a

corporation)corporation) wouldwould notnot generategenerate thethe feudalfeudal feesfees thatthataa lordlord couldcould claimclaim uponupon aa landholder'slandholder's deathdeath..


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Origin of corporationOrigin of corporation

EarlyEarly corporationscorporations ofof thethe commercialcommercialsort,sort, suchsuch asas thethe DutchDutch EastEast IndiaIndiaCompanyCompany formedformed underunder frameworksframeworks(set(set upup byby governmentsgovernments ofof states)states) toto

undertakeundertake taskstasks whichwhich appearedappeared tootooriskyrisky oror tootoo expensiveexpensive forfor individualsindividuals ororthethe governmentsgovernments toto embarkembark uponupon..


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KennethKenneth Pomeranz,Pomeranz, anan economiceconomic historian,historian,

arguesargues thatthat thethe needneed toto performperform pseudopseudo--

governmentalgovernmental operationsoperations suchsuch asas thethe wagingwaging ofof

warwar accountsaccounts forfor thethe developmentdevelopment ofof thisthis

economiceconomic structurestructure inin EuropeEurope butbut notnot inin

ChinaChina oror inin thethe MiddleMiddle EastEast..


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QuotationsQuotations

"Business"Business isis inin itselfitself anan evilevil.."" -- SaintSaint AugustineAugustine

"Whoever"Whoever couldcould makemake twotwo earsears ofof corncorn oror twotwo

bladesblades ofof grassgrass toto growgrow uponupon aa spotspot ofof groundground

wherewhere onlyonly oneone grewgrew beforebefore wouldwould deservedeserve

betterbetter ofof mankindmankind andand dodo moremore essentialessential serviceservice

toto hishis countrycountry thanthan thethe wholewhole racerace ofof politicianspoliticians

putput togethertogether.."" --JonathanJonathan SwiftSwift


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Evolution of ManagementEvolution of Management

Anthropological DevelopmentAnt

hropological Development

Agricultural Growth& DevelopmentAgricultural Growth& Development

Industrial RevolutionIndustrial Revolution


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Anthropological DevelopmentAnthropological Development

Anthropology is the study ofAnthropology is the study ofhuman development.human development.


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contcont

The approach tries to explore howThe approach tries to explore how

exactly the growth& developmentexactly the growth& developmentofhuman kind is associated withofhuman kind is associated with

evolution of Business &evolution of Business &

ManagementManagement..


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contcont

Nomadic Life of early humansNomadic Life of early humans

Human SettlementHuman Settlement

Group & Family FormationGroup & Family Formation

From Hunting to AgricultureFrom Hunting to Agriculture


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Anthropological Development contAnthropological Development cont

From Hunting to AgricultureFrom Hunting to Agriculture

Choice of OccupationChoice of Occupation

According to requirements of the systemAccording to requirements of the system

Specialization at functional levelSpecialization at functional level

Assorted with need of utilitiesAssorted with need of utilities

Supported by a mechanism of Demand & SupplySupported by a mechanism of Demand & Supply


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Early Industrialization contEarly Industrialization cont

Surplus Labor in the Agricultural SectorSurplus Labor in the Agricultural Sector

Selects an OccupationSelects an Occupation (Profession)(Profession)

Develops Primitive EnterpriseDevelops Primitive Enterprise

OneP

ersonP

erforming All FunctionsOneP

ersonP

erforming All Functions(Cottage Industry)(Cottage Industry)

Supported By Increase In DemandSupported By Increase In Demand

(Due to Rise in Population & Consumption )(Due to Rise in Population & Consumption )


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Early Industrialization contEarly Industrialization cont

Supported By Increase In DemandSupported By Increase In Demand(Due to Rise in Population & Consumption )(Due to Rise in Population & Consumption )

Increase in SizeIncrease in Size

High Deployment ofPeople & Other RecoursesHigh Deployment ofPeople & Other Recourses

Division ofLabor orWorkDivision ofLabor orWork

Gives RiseGives Rise

Complex Organizational DesignComplex Organizational Design


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Consequential EffectConsequential Effect

To adequately arrange & adjust forTo adequately arrange & adjust for

Supplies to match growing demand, andSupplies to match growing demand, and

pace up supervision for variety of processpace up supervision for variety of process

& people, for the first time triggered of& people, for the first time triggered of

managerial expertise in business.managerial expertise in business.

Such expertise in business where knownSuch expertise in business where known

asas WISDOMWISDOM..


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The Industrial Revolutions InfluenceThe Industrial Revolutions Influence

On Management PracticesOn Management Practices

IndustrialIndustrial revolutionrevolution

MachineMachine powerpower beganbegan toto substitutesubstitute forforhumanhuman powerpower

LeadLead toto massmass productionproduction ofof economicaleconomical goodsgoods

ImprovedImproved andand lessless costlycostly transportationtransportation systemssystemsbecamebecame availableavailable

CreatedCreated largerlarger marketsmarkets forfor goodsgoods..

LargerLarger organizationsorganizations developeddeveloped toto serveserve largerlarger

marketsmarketsCreatedCreated thethe needneed for for formalizedformalized managementmanagement

practicespractices..

business as institution

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